U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1998
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ___________ to ___________
Commission file number 33-6505D
MORLEX, INC.
(formerly known as America Online, Inc.)
(Name of Small Business Issuer in its charter)
Colorado 84-1028977
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
P.O. Box 3755, Englewood, CO 80155
(Address of principal executive offi es) (Zip Code)
Issuer's telephone number, including area code: (303) 699-8784
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
None
(Title of Class)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes ___ No X
.
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
State issuer's revenues for its most recent fiscal year. None
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days: Unknown
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of March 30, 1999, there were
314,200,000 shares of the issuer's common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Transitional Small Business Disclosure Format (check one): Yes ____; No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Morlex, Inc. (the "Company", "Morlex" or the "Registrant") was
incorporated in the State of Colorado on April 23, 1986. In January 1987,
Morlex, in a stock-for-stock exchange (the "Stock Exchange"), acquired America
OnLine, Inc. ("AOL#1"), a then wholly owned subsidiary of InfoSource Information
Service, Inc. ("InfoSource"). The Company changed its name from Morlex to
America Online, Inc. on July 17, 1987 (the "Name Change").
Prior to incorporation, the Company had no prior operating history and
was formed as what is commonly known as a blind pool. Since the termination of
the business of the former AOL#1, the Company has been seeking the acquisition
of, or merger with, an existing company. The Company's business history since
its incorporation is as follows:
On September 10, 1986, the Company filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-18
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
an offering of up to 5,000,000 Units. In December 1986, the Company consummated
the offering, having received net offering proceeds aggregating $248,400.00.
In January 1987, the Company acquired AOL#1 in the Stock Exchange, as a
result of which AOL#1 became a wholly owned subsidiary of the Company in
exchange for 85,000,000 shares of Company stock which were issued to InfoSource
for all the shares of AOL#1.
On July 17, 1987, a special meeting of stockholders of the Company was
held to change the name of Morlex to America Online, Inc. The proposal to change
the name was approved and the Company's name was thereupon changed.
On March 1, 1988, the Board of Directors approved the cancellation of a
$30,000.00 debt to InfoSource by issuing 30,000,000 shares of the Company to
InfoSource. All 115,000,000 shares previously issued to InfoSource (including
such 30,000,000 shares and the 85,000,000 shares granted to InfoSource pursuant
to the Stock Exchange) were returned to the Company's treasury as issued but no
longer outstanding shares.
On December 28, 1992, the Company terminated the business of AOL#1 and
a Certificate of Dissolution of AOL#1 was filed with the Secretary of State of
the State of Colorado. Since that time, the Company has had no active business.
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On April 24, 1998, the Board of Directors, by unanimous written consent
in lieu of a special meeting, resolved to amend the Company's Articles of
Incorporation to change the name of the Company back to Morlex, Inc. in order to
remove any confusion between the Company and the Internet company of the same
name.
On May 15, 1998, the shareholders of the Company, by majority vote,
approved the amendment and name change at a meeting called for that purpose. The
amendment was filed with the Secretary of State of Colorado on June 2, 1998,
upon which the name of the Company became Morlex, Inc.
PRIVATE PLACEMENTS
The Company completed two private placements of its Common Stock, par
value $.0001 per share, in December 1997 and July 1998. In December 1997,
Charles T. Gould, a director, purchased 35,970,000 shares of Common Stock in
exchange for the cancellation of $49,191.00 of indebtedness of the Company to
Mr. Gould. In July 1998, Steven J. Goodman, a director and Secretary of the
Company, and Lawrence E. Kaplan, a director and President of the Company, each
purchased 94,260,000 shares of Common Stock in exchange for $3,000.00 each in
cash and $6,246.00 each in previous services rendered, or an aggregate of
188,520,000 shares of Common Stock with an aggregate purchase price of $6,000.00
in cash and $12,852.00 in previous services rendered. The Company currently has
virtually no cash or other assets. As a result, Messrs. Kaplan, Goodman and
Gould now own an aggregate of 90% of the Company's outstanding Common Stock.
RESIGNATION OF DIRECTORS
In July, 1998, Kaylene Veron and Lannelle Lancaster resigned as
directors of the Company. Mr. Gould, the remaining director, thereupon elected
Messrs. Goodman and Kaplan as directors. These directors thereupon elected Mr.
Kaplan as President and Treasurer, and Mr. Goodman as Secretary of the Company.
SELECTION OF OPPORTUNITIES
The analysis of new business opportunities has and will be undertaken
by or under the supervision of the officers and directors of the Registrant. The
Registrant has unrestricted flexibility in seeking, analyzing and participating
in potential business opportunities. In its efforts to analyze potential
acquisition targets, the Registrant will consider the following kinds of
factors:
(a) Potential for growth, indicated by new technology, anticipated
market expansion or new products;
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(b) Competitive position as compared to other firms of similar
size and experience within the industry segment, as well as
within the industry as a whole;
(c) Strength and diversity of management, either in place or
scheduled for recruitment;
(d) Capital requirements and anticipated availability of required
funds to be provided by the Registrant or from operations,
through the sale of additional securities, through joint
ventures or similar arrangements or from other sources;
(e) The cost of participation by the Registrant as compared to the
perceived tangible and intangible values and potentials;
(f) The extent to which the business opportunity can be advanced;
(g) The accessibility of required management expertise, personnel,
raw materials, services, professional assistance and other
required items; and
(h) Other relevant factors.
In applying the foregoing criteria, no one of which will be
controlling, management will attempt to analyze all factors and circumstances
and make a determination based upon reasonable investigative measures and
available data. Potentially available business opportunities may occur in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex. Due to the Registrant's extremely
limited capital available for investigation and management's limited experience
in business analysis, the Registrant may not discover or adequately evaluate
adverse facts about the opportunity to be acquired.
FORM OF ACQUISITION
The manner in which the Registrant participates in an opportunity will
depend upon the nature of the opportunity, the respective needs and desires of
the Registrant and the promoters of the opportunity, and the relative
negotiating strength of the Registrant and such promoters.
It is likely that the Registrant will acquire its participation in a
business opportunity through the issuance of common stock or other securities of
the Registrant. Although the terms of any such transaction cannot be predicted,
it should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"),
depends upon the issuance to the shareholders of the acquired company of at
least 80 percent of the common stock of the combined entities immediately
following the reorganization. If a
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transaction were structured to take advantage of these provisions rather than
other "tax free" provisions provided under the Code, all prior shareholders
would retain 20% or less of the total issued and outstanding shares. This could
result in substantial additional dilution to the equity of those who were
shareholders of the Registrant prior to such reorganization.
The present shareholders of the Registrant will likely not have control
of a majority of the voting shares of the Registrant following a reorganization
transaction. As part of such a transaction, all or a majority of the
Registrant's directors may resign and new directors may be appointed without any
vote by shareholders.
In the case of an acquisition, the transaction may be accomplished upon
the sole determination of management without any vote or approval by
shareholders. In the case of a statutory merger or consolidation involving the
Company, it will likely be necessary to call a shareholders' meeting and obtain
the approval of the holders of a majority of the outstanding shares. The
necessity to obtain such shareholder approval may result in delay and additional
expense in the consummation of any proposed transaction and will also give rise
to certain appraisal rights to dissenting shareholders. Most likely, management
will seek to structure any such transaction so as not to require shareholder
approval.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
management time and attention and substantial cost for accountants, attorneys
and others. If a decision is made not to participate in a specific business
opportunity, the costs theretofore incurred in the related investigation would
not be recoverable. Furthermore, even if an agreement is reached for the
participation in a specific business opportunity, the failure to consummate that
transaction may result in the loss to the Registrant of the related costs
incurred.
EMPLOYEES
The Registrant currently has no employees.
ITEM 2. DESCRIPTION OF PROPERTY
The Company neither rents nor owns any properties. The Company
currently has no policy with respect to investments or interests in real estate,
real estate mortgages or securities of, or interests in, persons primarily
engaged in real estate activities.
ITEM 3. LEGAL PROCEEDINGS
There are not presently any pending legal proceedings to which the
Registrant is a party or as to which any of its property is subject.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
A. Market for Common Stock. The Company is not aware of any market
activity in its stock during the fiscal year ended December 31, 1998.
B. Holders. As of March 30, 1999, there were approximately 276 holders of
314,200,000 shares of the Company's common stock.
C. Dividends. The Registrant has not paid any cash dividends during either
the fiscal year ended December 31, 1997 or December 31, 1998 and does not
anticipate or contemplate paying dividends in the foreseeable future. It is the
present intention of management to utilize all available funds for the
development of the Registrant's business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The Registrant was formed on April 23, 1986 for the purpose of
investing in any and all types of assets, properties and businesses. On
September 10, 1986, the Commission granted effectiveness to a Registration
Statement on Form S-18, filed by the Registrant in the Colorado Regional Office.
The Plan of Operation of the Registrant is briefly described below and further
described in Item 1 of this Form 10-KSB.
As of December 31, 1998, the Registrant had cash of $0 and no other
assets. As of December 31, 1998, the Registrant had total liabilities of $0 and
total stockholders equity of $0. As of December 31, 1997, the Registrant had
cash of $0 and no other assets. As of December 31, 1997, the Registrant had
total liabilities of $0 and total stockholders equity of $0. Prior to the
consummation of a potential business acquisition as described in Item 1 of this
Form 10-KSB, management does not expect that the Registrant will have any
significant capital requirements or will purchase any significant equipment or
that there will be significant changes in the number of Registrant's employees.
The Registrant has not commenced any active operations as of the date
hereof except for the registration and sale of its securities. The Registrant's
assets consist of a limited amount of cash. No revenue has been generated by the
Registrant since the termination of the business of
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AOL#1. The Registrant will not have significant operations until, if ever, such
time as it effects an acquisition.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had no assets. The significant
amount of capital necessary to acquire and develop a successful business in
today's economy will limit the Company's ability to locate one suitable for
acquisition or merger. Given the limited amount of working capital, the
potential venture is likely to involve the acquisition of, or merger with, a
company which is not seeking immediate substantial amounts of cash but one which
desires to establish a public trading market for its shares. There can be no
assurance that the Company will ever consummate such a transaction. It is
possible that the Company will require additional financing to expand and fund
any business which it acquires or establishes. If additional funds are required,
there can be no assurance given that additional financing will be available on
commercially reasonable terms or otherwise.
PLAN OF OPERATION
The Company has not realized any revenues from operations, and its plan
of operation for the next twelve months shall be to continue its efforts to
locate suitable acquisition or merger candidates. Although it is currently
anticipated that the Company can satisfy its cash requirements, and that no
additional funds need be raised, for at least the next twelve months, the
Company can provide no assurance that it can continue to satisfy its cash
requirements for such period.
RESULTS OF OPERATIONS
The Company has not conducted any active operations in the past fiscal
year, except for its efforts to locate suitable acquisition or merger
transactions. No revenue has been generated by the Company during such period,
and it is unlikely the Company will have any revenues unless it is able to
effect an acquisition of, or merger with, an operating company, of which there
can be no assurance.
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ITEM 7. FINANCIAL STATEMENTS
Index to Financial Statements
-----------------------------
Independent Accountants' Report
Year ended December 31, 1998....................................F-2
Balance Sheets
Years ended December 31, 1998 and 1997..........................F-3
Statements of Operations for the Years
Ended December 31, 1998 and 1997................................F-4
Statement of Changes in Shareholders' Equity
Years ended December 31, 1998 and 1997..........................F-5
Statement of Cash Flows
Year ended December 31, 1998 and 1997...........................F-6
Notes to Financial Statements
Years ended December 31, 1998...................................F-7
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the
Registrant and its accountants on any matter of accounting principles, practices
or financial statement disclosure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
A. Identification of Directors and Executive Officers. The current
officers and directors will serve for one year or until their respective
successors are elected and qualified. They are:
<TABLE>
<CAPTION>
NAME AGE DATE OF POSITION
ELECTION
<S> <C> <C> <C>
Charles T. Gould 47 4/5/91 Director
4562 S. Ouray Way
Aurora, CO 80015
Lawrence E. Kaplan 55 7/29/98 President, Treasurer and
150 Vanderbilt Motor Director
Parkway, Suite 311
Hauppauge, New York 11788
Steven J. Goodman 59 7/29/98 Secretary and Director
24843 Del Prado #536
Dana Point, CA 92629
</TABLE>
8
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Charles T. Gould. Mr. Gould has been a director of the Company since
April 1991. He is presently a Stock Broker and Trader with Charles Schwab in
Denver, Colorado. Prior to Mr. Gould's employment with Charles Schwab & Co., he
served as an Environmental Production Worker with Interel Environmental in
Englewood, Colorado.
Lawrence E. Kaplan. Mr. Kaplan has served as President, Treasurer and
a director of the Company since July, 1998. Mr. Kaplan has served as a director
of IDF International, Inc. since August 1996. Mr. Kaplan is a registered
representative, officer, director and sole stockholder of G-V Capital Corp., an
NASD-registered broker/dealer. He is also a director of Playorena, Inc., a blank
check company which is seeking merger opportunities. He is also an officer and a
director of Osteoimplant Technology, a manufacturer of orthopedic devices and
total joint implants.
Steven J. Goodman. Mr. Goodman has served as Secretary and a director
of the Company since July, 1998. Mr. Goodman is a consultant for Tessa Financial
Group, Inc. From 1991 through March, 1995, Mr. Goodman was West Coast Managing
Director of Creative Business Strategies, a financial corporate consulting firm.
Mr. Goodman currently serves as a director of Javelin Systems, Inc., a public
company listed on NASDAQ.
B. Significant Employees. None.
C. Family Relationships. Charles T. Gould is the husband of Lanne
Lancaster and the brother of Kaylene Veron. Ms. Lancaster served as the Vice
President and Secretary of the Company from March, 1989 until July, 1998.
Presently, she is the record owner of 790,000 shares of Common Stock of the
Company. Ms. Veron served as a director of the Company from March, 1989 until
July, 1998. Presently, Ms. Veron owns no shares of the Company.
D. Involvement in Certain Legal Proceedings. There have been no events
under any bankruptcy act, no criminal proceedings and no judgments, injunctions,
orders or decrees material to the evaluation of the ability and integrity of any
director, executive officer, promoter or control person of Registrant during the
past five years.
E. Compliance With Section 16(a). The Registrant is not subject to
Section 16 of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
No compensation has been paid or accrued to any officer or director of
the Registrant since 1994. Except as otherwise indicated in Item 12, the current
officers and directors are not being compensated by the Registrant. The
Registrant has no current intent to issue shares of its common stock to
management in connection with an acquisition. However, the Registrant may
subsequently deem the issuance of shares to management for services rendered in
connection with an acquisition to be fair and reasonable to the Registrant and
its public shareholders in light
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of the services rendered. In the event any shares are issued for services
rendered by management they shall be issued in such an amount as the Board of
Directors deems fair and reasonable to the Registrant and its public
shareholders and in compliance with management's fiduciary duties under state
law. Officers and directors will be reimbursed for actual out-of-pocket expenses
incurred on behalf of the Registrant as approved by the Board of Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
A. Security Ownership of Certain Beneficial Owners. The following
persons are known to the Registrant to be officers, directors and beneficial
owners of more than five percent of the Registrant's common stock as of March
30, 1999:
<TABLE>
<CAPTION>
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership (1) Percent of Class
- ------------------- ------------------------ ----------------
<S> <C> <C>
Charles T. Gould 94,260,000 30%
4562 S. Ouray Way
Aurora, CO 80015
Lawrence E. Kaplan 94,260,000 30%
150 Vanderbilt Motor Parkway
Suite 311
Hauppauge, New York 11788
Steven J. Goodman 94,260,000 30%
24843 Del Prado
Dana Point, CA 92629
ALL OFFICERS AND
DIRECTORS AS A
GROUP (3 Individuals) 282,780,000 90%
</TABLE>
- ----------------
(1) Unless otherwise indicated herein and subject to applicable community
property laws, each stockholder has sole voting and investment power
with respect to all shares of Common Stock beneficially owned by such
stockholder and directly owns all such shares in such stockholder's
sole name. Within sixty (60) days of the date of this filing, none of
the above persons has the right to acquire any further shares of the
Registrant's common stock from options, warrants, rights, conversion
privileges or other similar arrangement.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company completed two private placements of its Common Stock, par
value $.0001 per share, in December 1997 and July 1998. In December 1997,
Charles T. Gould, a director, purchased 35,970,000 shares of Common Stock in
exchange for the cancellation of $49,191.00 of indebtedness of the Company to
Mr. Gould. In July 1998, Steven J. Goodman, a director and Secretary of the
Company, and Lawrence E. Kaplan, a director and President of the Company, each
purchased 94,260,000 shares of Common Stock in exchange for $3,000.00 each in
cash and $6,246.00 each in previous services rendered, or an aggregate of
188,520,000 shares of Common Stock with an aggregate purchase price of $6,000.00
in cash and $12,852.00 in previous services rendered. The Company currently has
virtually no cash or other assets. As a result, Messrs. Kaplan, Goodman and
Gould now own an aggregate of 90% of the Company's outstanding Common Stock.
Charles T. Gould is the husband of Lanne Lancaster and the brother of
Kaylene Veron. Ms. Lancaster served as the Vice President and Secretary of the
Company from March, 1989 until July, 1998. Presently, she is the record owner of
790,000 shares of Common Stock of the Company. Ms. Veron served as a director of
the Company from March, 1989 until July, 1998. Presently, Ms. Veron owns no
shares of the Company.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:
3.1 Certificate of Incorporation - incorporated by reference
to Exhibit 3.1 to Registration Statement on Form S-18.
3.2 Bylaws - incorporated by reference to Exhibit 3.2 to
Registration Statement on Form S-18.
10.1 Stock Purchase Agreement by and between the Registrant
and Charles T. Gould.
10.2 Common Stock Purchase Agreement by and between the
Registrant and Steven J. Goodman.
10.3 Common Stock Purchase Agreement by and between the
Registrant and Lawrence E. Kaplan.
27.1 Financial Data Schedule.
B. Reports on Form 8-K. No Reports on Form 8-K were filed by the
Registrant during the fourth quarter of, or at any time during, its fiscal year.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MORLEX, INC.,
F/K/A AMERICA ONLINE, INC.
By: /s/ Lawrence E. Kaplan
President and Treasurer
Date: May 5, 1999.
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
TITLE DATE
By: /s/ Charles T. Gould Chairman and May 5, 1999
Director
By: /s/ Lawrence E. Kaplan President, May 5, 1999
Treasurer,
Director
By: /s/ Steven J. Goodman Secretary, May 5, 1999
Director
Supplemental Information to be Furnished With
Reports Filed Pursuant to Section 15(d) of the Exchange Act
by Non-reporting Issuers
No annual report to security holders or proxy material has been sent to security
holders of the Registrant.
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MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Morlex, Inc. (formerly America OnLine, Inc.)
We have audited the accompanying balance sheets of Morlex, Inc. (formerly
America OnLine, Inc.) as of December 31, 1998 and 1997 and the statements of
operations, changes in shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred above present fairly, in all
material respects, the financial position of Morlex, Inc. (formerly America
OnLine, Inc.), at December 31, 1998 and 1997, and the related statements of
operations, changes in shareholders' equity and cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to this matter are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Denver, Colorado
March 30, 1999
F-2
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
==========================
1998 1997
-------- --------
ASSETS
CASH $ 3,664 $ --
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
ACCOUNTS PAYABLE $ 476 $ --
======== ========
SHAREHOLDERS' EQUITY:
Common stock, $.0001 par value - shares authorized,
1,000,000,000; shares issued and outstanding, 31,420 12,568
314,200,000 and 125,680,000, respectively 298,728 291,728
Additional paid-in capital (326,960) (304,296)
-------- --------
Deficit 3,664 --
-------- --------
TOTAL SHAREHOLDERS' EQUITY $ 3,664 $ --
======== ========
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------ -----------
REVENUES $ -- $ --
------------ -----------
EXPENSES:
Consulting 12,852 3,300
Professional fees 9,113 --
General and administrative 699 2,052
------------ -----------
TOTAL EXPENSES 22,664 5,352
------------ -----------
NET LOSS $ (22,664) $ (5,352)
============ ===========
NET LOSS PER COMMON SHARE $ NIL $ NIL
============ ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 219,940,000 92,476,923
============ ===========
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID IN
SHARES AMOUNT CAPITAL (DEFICIT)
-------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1996 89,710,000 $ 8,971 $ 246,134 $ (298,944)
Issuance of common stock 35,970,000 3,597 45,594 -
Net loss - - - (5,352)
-------------- ---------------- ---------------- --------------
BALANCES, DECEMBER 31, 1997 125,680,000 12,568 291,728 (304,296)
Issuance of common stock 188,520,000 18,852 - -
Capital contributed - - 7,000 -
Net loss - - - (22,664)
-------------- ---------------- ---------------- --------------
BALANCES, DECEMBER 31, 1998 314,200,000 $ 31,420 $ 298,728 $ (326,960)
============== ================ ================ ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(22,664) $ (5,352)
-------- --------
Adjustments to reconcile net loss to net cash used in
operating activities:
Increase in accounts payable 476 --
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (22,188) (5,352)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Shareholder advances -- 5,352
Issuance of common stock 18,852 --
Capital contributed 7,000 --
-------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES 25,852 5,352
-------- --------
NET INCREASE IN CASH 3,664 --
CASH, beginning of year -- --
-------- --------
CASH, end of year $ 3,664 $ --
======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES:
Issuance of common stock for debt $ -- $ 49,191
======== ========
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
The Company was incorporated under the laws of the State of Colorado on April
23, 1986. The primary activity of the Company was to seek merger or acquisition
candidates.
As shown in the financial statements, the Company incurred net losses for the
last several years and has no working capital and has accumulated a deficit of
$326,960; it is management's assertion that these circumstances may hinder the
Company's ability to continue as a going concern. As of the date of this report,
management has not developed a formal plan to raise funds for neither the
Company's short or long term needs.
The Company successfully completed a public stock offering in December 1986.
Proceeds to the Company, net of direct registration and underwriting fees,
amounted to $248,400. It has had minimal operations over the last several years.
NET LOSS PER SHARE
Net loss per share of common stock is based on the weighted average number of
shares of common stock outstanding.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ form those estimates.
INCOME TAXES
The Company has a remaining net operating loss carryforward of approximately
$300,000 expiring principally in 2002 and 2003. However, the Company's ability
to utilize such losses to offset future taxable income is subject to various
limitations imposed by the rules and regulations of the Internal Revenue
Service. A portion of the Company's net operating losses are limited each year
to offset future taxable income, if any, due to the change of ownership in the
Company's outstanding shares of common stock.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company had accrued certain amounts due to one of its major shareholders for
payment of consulting fees, rent and other administrative expenses. In December,
1997, these amounts ($49,191) were converted to 35,970,000 shares of common
stock.
F-7
<PAGE>
EXHIBIT INDEX
3.1 Registrant's Certificate of Incorporation filed as Exhibit 3.1 to
Registrant's Registration Statement on Form S-18.
3.2 Registrant's By-Laws filed as Exhibit 3.2 to Registrant's Registration
Statement on Form S-18.
10.1 Stock Purchase Agreement by and between the Registrant and Charles T.
Gould.
10.2 Common Stock Purchase Agreement by and between the Registrant and
Steven J. Goodman.
10.3 Common Stock Purchase Agreement by and between the Registrant and
Lawrence E. Kaplan.
27.1 Financial Data Schedule.
EXHIBIT 10.1
COMMON STOCK PURCHASE AGREEMENT
AGREEMENT entered into as of the 31st day of December, 1997, by and
among AMERICA ONLINE, INC., a Colorado corporation with a principal place of
business at P.O. Box 3755, Englewood, CO 80155 (the "Company") and CHARLES T.
GOULD, with an address at 4562 S. Durey Way, Aurora, CO 80015 ("Purchaser").
WHEREAS, the Company desires to sell, and the Purchaser desires to
sell, an aggregate of thirty-five million seven hundred and ninety thousand
(35,790,000) shares (the "Shares") of the Company's Common Stock, par value
$.0001 per share (the "Common Stock") upon the terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the Company and the Purchaser hereby
agree as follows:
SECTION 1: SALE OF THE SHARES
1.1 Sale of the Shares. Subject to the terms and conditions hereof,
and in reliance upon the representations, warranties and agreements contained
herein, the Company will sell and deliver to the Purchaser and the Purchaser
will purchase from the Company, upon the execution and delivery hereof, the
Shares for a purchase price equal to cancellation of all existing indebtedness
of the Company to Purchaser.
SECTION 2: CLOSING DATE; DELIVERY
2.1 Closing Date. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held following the execution and delivery of
this Agreement (the "Closing Date") at such time and place as shall be mutually
agreed upon by the Company and the Purchaser.
2.2 Delivery; Conversion of Principal and Interest Due. At the Closing,
the Company will deliver to the Purchaser stock certificates registered in the
Purchaser's name, representing the number of Shares to be purchased by Purchaser
hereunder, against payment of the purchase price therefor by forgiveness of all
indebtedness, including all principal and interest owed by the Company to
Purchaser pursuant to certain loans made by Purchaser to the Company, upon which
all such principal and interest shall be deemed paid in full by the Company and
as to which the Purchaser hereby releases and discharges the Company in full
thereupon.
SECTION 3: REPRESENTATIONS AND WARRANTIES OF COMPANY
3.1 Capitalization. The Company hereby represents and warrants to the
Purchaser that, immediately prior to the Closing, the Company's authorized
capital stock will consist of 1,000,000,000 shares of its Common Stock, of which
89,710,000 shares will be issued and outstanding immediately prior to the
Closing.
SECTION 4: REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
4.1 Experience. It has such knowledge and experience in financing and
business matters that it is capable of evaluating the merits and risks of an
investment in the Shares and of making an informed decision and has the capacity
to protect its own interests.
4.2 Investment; Access to Data. It is acquiring the Shares for
investment for its own account, not as a nominee or agent and not with the view
to, or for resale in connection with, any distribution thereof. It has had an
opportunity to discuss the Company's business, management and financial affairs
with the Company's management and has been supplied with all information it
deems necessary to make an informed investment decision. It acknowledges that
the Company operates as a public "shell" seeking to acquire or merge with an
operating business, as to which there can be no assurance, possibly causing an
entire loss of Purchaser's investment in the Company.
4.3 Authorization. (a) This Agreement, upon execution and delivery
thereof, will be a valid and
<PAGE>
binding obligation of Purchaser, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general application
affecting enforcement of creditors' rights generally.
(b) The execution, delivery and performance by Purchaser of
this Agreement and compliance therewith and the purchase and sale of the Shares
will not result in a violation of and will not conflict with, or result in a
breach of, any of the terms of, or constitute a default under, any provision of
state or Federal law to which Purchaser is subject, or any mortgage, indenture,
agreement, instrument, judgment, decree, order, rule or regulation or other
restriction to which the Purchaser is a party or by which it is bound, or result
in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of Purchaser pursuant to any such term.
4.4 Accredited Investor. Purchaser is an accredited investor as defined
in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended by
virtue of Purchaser's status as a director, Chairman and President of the
Company.
SECTION 5: MISCELLANEOUS
5.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Colorado, without regard to conflicts of laws
principles thereof.
5.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive the Closing.
5.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
5.4 Entire Agreement; Amendment; Waiver. This Agreement constitutes the
entire and full understanding and agreement between the parties with regard to
the subject matter hereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument signed
by all the parties hereto.
5.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together,
shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
AMERICA ONLINE, INC.
By:
Charles T. Gould, President
/S/ CHARLES T. GOULD
-----------------------------
CHARLES T. GOULD
<PAGE>
EXHIBIT 10.2
COMMON STOCK PURCHASE AGREEMENT
AGREEMENT entered into as of the 14th day of July, 1998, by and between
Morlex, Inc., a Colorado corporation with offices in Englewood, Colorado (the
"Company") and Steven J. Goodman with an address at 2910 Red Hill Ave., Costa
Mesa, California 92626 ("Purchaser").
WHEREAS, the Purchaser desires to purchase, and the Company desires to
sell, an aggregate of ninety-four million two hundred and sixty thousand
(94,260,000) shares (the "Shares") of the Company's Common Stock, par value
$.0001 per share (the "Common Stock") upon the terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Purchaser and the Company hereby agree as
follows:
SECTION 1: SALE OF THE SHARES
1.1 Sale of the Shares. Subject to the terms and conditions hereof, the
Company will sell and deliver to the Purchaser and the Purchaser will purchase
from the Company, upon the execution and delivery hereof, the Shares for a
purchase price equal to par value of each share, at $.0001 per share or an
aggregate of $9,426, of which $3,000 will be paid in cash and the remainder is
deemed paid by the previous rendering, during 1998, of consulting and financial
advising services to the Company by Purchaser.
SECTION 2: CLOSING DATE; DELIVERY
2.1 Closing Date. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held immediately following the execution and
delivery of this Agreement.
2.2 Delivery at Closing. At the Closing, the Company will deliver to
the Purchaser stock certificates registered in the Purchaser's name,
representing the number of Shares to be purchased by Purchaser hereunder,
against payment of the purchase price therefor by check of the Purchaser.
SECTION 3: REPRESENTATIONS AND WARRANTIES OF COMPANY
3.1 Capitalization. The Company hereby represents and warrants to the
Purchaser that, immediately prior to the Closing, the Company's authorized
capital stock will consist of 1,000,000,000 shares of its Common Stock, of which
125,680,000 shares will be issued and outstanding immediately prior to the
Closing.
SECTION 4: REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
4.1 Experience. It has such knowledge and experience in financing and
business matters that it is capable of evaluating the merits and risks of an
investment in the Shares and of making an informed decision and has the capacity
to protect its own interests.
4.2 Investment; Access to Data. It is acquiring the Shares for
investment for its own account, not as a nominee or agent and not with the view
to, or for resale in connection with, any distribution thereof. It has had an
opportunity to discuss the Company's business, management and financial affairs
with the Company's management and has been supplied with all information it
deems necessary to make an informed investment decision. It acknowledges that
the Company operates as a public "shell" seeking to acquire or merge with an
operating business, as to which there can be no assurance, possibly causing an
entire loss of Purchaser's investment in the Company.
4.3 Authorization. (a) This Agreement, upon execution and delivery
thereof, will be a valid and
<PAGE>
binding obligation of Purchaser, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and moratorium laws
and other laws of general application affecting enforcement of creditors' rights
generally.
(b) The execution, delivery and performance by Purchaser of
this Agreement and compliance therewith and the purchase and sale of the Shares
will not result in a violation of and will not conflict with, or result in a
breach of, any of the terms of, or constitute a default under, any provision of
state or Federal law to which Purchaser is subject, or any mortgage, indenture,
agreement, instrument, judgment, decree, order, rule or regulation or other
restriction to which the Purchaser is a party or by which it is bound, or result
in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of Purchaser pursuant to any such term.
4.4 Accredited Investor. Purchaser is an accredited investor as defined
in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended.
SECTION 4: MISCELLANEOUS
4.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Colorado, without regard to conflicts of laws
principles thereof.
4.2 Survival. The terms, conditions and agreements made herein shall
survive the Closing.
4.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
4.4 Entire Agreement; Amendment; Waiver. This Agreement constitutes the
entire and full understanding and agreement between the parties with regard to
the subject matter hereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument signed
by all the parties hereto.
4.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together,
shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
MORLEX, INC.
By:
/S/ CHARLES T. GOULD
-----------------------------
CHARLES GOULD, PRESIDENT
/s/ STEVEN J. GOODMAN
-----------------------------
STEVEN J. GOODMAN
<PAGE>
EXHIBIT 10.3
COMMON STOCK PURCHASE AGREEMENT
AGREEMENT entered into as of the 14th day of July, 1998, by and between
Morlex, Inc., a Colorado corporation with offices in Englewood, Colorado (the
"Company") and Lawrence E. Kaplan with an address at 150 Vanderbilt Motor
Parkway, Suite 311, Hauppauge, New York 11788 ("Purchaser").
WHEREAS, the Purchaser desires to purchase, and the Company desires to
sell, an aggregate of ninety-four million two hundred and sixty thousand
(94,260,000) shares (the "Shares") of the Company's Common Stock, par value
$.0001 per share (the "Common Stock") upon the terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Company and the Purchaser hereby agree as
follows:
SECTION 1: SALE OF THE SHARES
1.1 Sale of the Shares. Subject to the terms and conditions hereof, the
Company will sell and deliver to the Purchaser and the Purchaser will purchase
from the Company, upon the execution and delivery hereof, the Shares for a
purchase price equal to par value of each share, at $ .0001 per share or an
aggregate of $9,426, of which $3,000 will be paid in cash and the remainder is
deemed paid by the previous rendering, during 1998, of and consulting and
financial advising services to the Company by Purchaser.
SECTION 2: CLOSING DATE; DELIVERY
2.1 Closing Date. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held immediately following the execution and
delivery of this Agreement.
2.2 Delivery at Closing. At the Closing, the Company will deliver to
the Purchaser stock certificates registered in the Purchaser's name,
representing the number of Shares to be purchased by Purchaser hereunder,
against payment of the purchase price therefor by check of the Purchaser.
SECTION 3: REPRESENTATIONS AND WARRANTIES OF COMPANY
3.1 Capitalization. The Company hereby represents and warrants to the
Purchaser that, immediately prior to the Closing, the Company's authorized
capital stock will consist of 1,000,000,000 shares of its Common Stock, of which
125,680,000 shares will be issued and outstanding immediately prior to the
Closing.
SECTION 4: REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
4.1 Experience. It has such knowledge and experience in financing and
business matters that it is capable of evaluating the merits and risks of an
investment in the Shares and of making an informed decision and has the capacity
to protect its own interests.
4.2 Investment; Access to Data. It is acquiring the Shares for
investment for its own account, not as a nominee or agent and not with the view
to, or for resale in connection with, any distribution thereof. It has had an
opportunity to discuss the Company's business, management and financial affairs
with the Company's management and has been supplied with all information it
<PAGE>
deems necessary to make an informed investment decision. It acknowledges that
the Company operates as a public "shell" seeking to acquire or merge with an
operating business, as to which there can be no assurance, possibly causing an
entire loss of Purchaser's investment in the Company.
4.3 Authorization. (a) This Agreement, upon execution and delivery
thereof, will be a valid and binding obligation of Purchaser, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general application
affecting enforcement of creditors' rights generally.
(b) The execution, delivery and performance by Purchaser of
this Agreement and compliance therewith and the purchase and sale of the Shares
will not result in a violation of and will not conflict with, or result in a
breach of, any of the terms of, or constitute a default under, any provision of
state or Federal law to which Purchaser is subject, or any mortgage, indenture,
agreement, instrument, judgment, decree, order, rule or regulation or other
restriction to which the Purchaser is a party or by which it is bound, or result
in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of Purchaser pursuant to any such term.
4.4 Accredited Investor. Purchaser is an accredited investor as defined
in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended.
SECTION 4: MISCELLANEOUS
4.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of New York, without regard to conflicts of laws
principles thereof.
4.2 Survival. The terms, conditions and agreements made herein shall
survive the Closing.
4.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
4.4 Entire Agreement; Amendment; Waiver. This Agreement constitutes the
entire and full understanding and agreement between the parties with regard to
the subject matter hereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument signed
by all the parties hereto.
4.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together,
shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
MORLEX, INC.
By:
/S/ CHARLES T. GOULD
-----------------------------
CHARLES GOULD, PRESIDENT
/s/ LAWRENCE E. KAPLAN
-----------------------------
LAWRENCE E. KAPLAN
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